109 HR 1766 IH: To amend the Internal Revenue Code of 1986 to simplify the determination and deduction of interest on qualified education loans. U.S. House of Representatives 2005-04-21 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.

I 109th CONGRESS 1st Session H. R. 1766 IN THE HOUSE OF REPRESENTATIVES April 21, 2005 Mr. English of Pennsylvania introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to simplify the determination and deduction of interest on qualified education loans.

1.

Treatment of origination fees and capitalized interest charges for qualified education loans

(a)

In general

Subsection (e) of section 221 of the Internal Revenue Code of 1986 (relating to special rules) is amended by adding at the end the following: (4)

Loan origination fees

For purposes of this section— (A)

Treatment as interest

Loan origination fees, other than fees for services or property— (i)shall be treated as interest, and (ii)shall accrue at the time the loan origination fees are deducted from the loan proceeds or otherwise are charged to or paid by the borrower. (B)

Fees under certain Federal programs

Loan origination fees required under the Federal Family Education Loan Program and Federal Direct Loan Program under title IV of the Higher Education Act of 1965 shall be treated as interest for purposes of subparagraph (A). (5)

Accrual of interest

For purposes of this section, interest on a qualified education loan (other than loan origination fees) shall accrue in accordance with the stated terms of the loan. (6)

Allocation of payments

For purposes of this section, a payment (other than payments of collection costs, late fees, and penalties, if any) is treated— (A)first as a payment of interest to the extent of the interest that has accrued and remains unpaid as of the date the payment is due, (B)second as a payment of any loan origination fees or capitalized interest, until such amounts have been reduced to zero, and (C)third as a payment of principal.. (b)

Conforming amendment

Section 6050S(e) of such Code is amended by adding at the end the following new sentence: The term interest has the same meaning as when used in section 221.. (c)

Effective date

(1)

In general

The amendment made by this section shall apply to taxable years ending on or after December 31, 2005. (2)

Special rule for interest reporting

The reporting under section 6050S of the Internal Revenue Code of 1986 with respect to capitalized interest and origination fees in accordance with the amendments made by this section shall not be required for loans made prior to September 1, 2004.